Sunday, October 20, 2013

Top Down S&P 500 Target Price, Earnings Forecasts, etc.

(Sources: Standard and Poor's, Federal Reserve)

According to the latest Bloomberg Survey, the median 2013 top-down target price for the S&P 500 is 1750 with an earnings forecast of $109.00, suggesting an implied PER of 16.06x. Meanwhile, the 2014 target price is 1900 based on an earnings forecast of $115.00 for a PER of 16.52x. A mild PER expansion scenario despite rising interest rates (10Y bond yield forecast Q4 13 of 2.80% => Q4 14 3.38%.) This would also seem to point to a continued decline in the equity risk premium and a well-behaved inflation picture.

The comparable bottom-up earnings forecasts are $110.57 for 2013 and $122.86 for 2014.